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                                  EXHIBIT 10.18

                              TB WOOD'S CORPORATION

               GRANT OF PREMIUM PRICED NON-QUALIFIED STOCK OPTION
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         1. Grant of Option and Exercise Price. Subject to the terms and
conditions set forth herein and in the TB Wood's Corporation 1996 Stock-Based
Incentive Compensation Plan (the "Plan"), TB Wood's Corporation (the "Company")
hereby grants to ______________, (the "Optionee"), a stock option (the "Option")
to purchase up to __________ shares of Common Stock of the Company, par value
$.01 per share (the "Common Stock"), at an exercise price of $18.00 per share
(the "Exercise Price"). The Option is a non-qualified stock option.

         2. Vesting of Options. One-third of the shares of Common Stock subject
to the option shall vest on the first anniversary of the date of grant of the
Option (the "Grant Date"), an additional one-third of the shares of Common Stock
subject to the option shall vest on the second anniversary of the Grant Date,
and the final one-third of the shares of Common Stock subject to the option
shall vest on the third anniversary of the Grant Date.

         3. Time of Exercise. The Option may be exercised from time to time with
respect to shares for which the Option has vested but no later than the fifth
anniversary of the Grant Date. Upon the fifth anniversary of the Grant Date, the
Optionee's right to exercise the Option shall terminate absolutely.

         4. Payment for Shares of Common Stock. Upon exercise of an Option and
before delivery of the shares of Common Stock, full payment for shares of Common
Stock purchased upon the exercise of the Option shall be made in cash or,
subject to the approval of the Company committee administering the Plan (the
"Committee"), in whole or in part in shares of Common Stock valued at the fair
market value on the date of exercise.

         5. Manner of Exercise. The Option shall be exercised by giving written
notice of exercise to the Company (Attn: Chief Financial Officer) at the
Company's main office at 440 North Fifth Avenue, Chambersburg, Pennsylvania
17201-1778. Such notice of exercise must include a statement of preference as to
the manner in which payment to the Company shall be made. Such notice shall be
deemed to have been given when hand-delivered, telecopied or mailed, first-class
postage prepaid, and shall be irrevocable once given.

         6. Issuance of Certificates. As promptly as is reasonably practicable
after the exercise of the Option as determined by the Company, a certificate for
the shares of Common Stock issuable on the exercise of the Option shall be
delivered to Optionee or to his personal representative, heir or legatee.

         7. Nontransferability of Option. The Option may not be transferred or
assigned by Optionee otherwise than by will or the laws of descent and
distribution or be exercised other than by Optionee or, in the case of his
death, by his personal representative, heir or legatee.

         8. Taxes. Optionee shall be responsible to make appropriate provision
for all taxes required to be withheld in connection with any Option, the
exercise thereof and the transfer of the shares of Common Stock. Such
responsibility shall extend to all applicable federal, state, local or foreign
withholding taxes. In the case of exercise of the Option, the Company shall, at
the election of Optionee, have the right to retain the number of shares of
Common Stock whose aggregate fair market value equals the amount to be withheld
in satisfaction of the applicable withholding taxes.

         9. Termination of Employment. If the Optionee's employment by the
Company (or a subsidiary thereof) is terminated for any reason, all unvested
Options shall be forfeited and the Optionee shall have no further right to
exercise such Options. If the Optionee's employment by the Company (or a
subsidiary thereof) is terminated by reason of disability or retirement, all
unexercised, vested Options may be exercised pursuant to the terms of the Option
for a period of three months from the date of such termination of employment or
until the expiration of the term of the Option, whichever period is shorter;
provided, however, that if the Optionee's employment is terminated by death, all
unexercised, vested Options may be exercised pursuant to the terms of the Option
for a period of six months from the date of such termination of employment or
until the expiration of the term of the Option, whichever period is 

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shorter. If the Optionee's employment by the Company (or a subsidiary thereof)
is terminated for any reason other than death, disability or retirement, all
unexercised, vested options shall terminate three months from the date of such
termination of employment.

         10. Rights Prior to Exercise. Neither Optionee nor his personal
representative, heir or legatee shall have any of the rights of a stockholder
with respect to any Common Stock until the date of the issuance to him or her of
a certificate for such Common Stock as provided herein.

         11. Amendments. The Committee may from time to time amend the terms of
this Option to the extent it deems appropriate to carry out the terms and
provisions of the Plan.

         12. Interpretation. The Committee shall have sole power to resolve any
dispute or disagreement arising out of this Agreement. The interpretation and
construction of any provision of this Option or the Plan made by the Committee
shall be final and conclusive and, insofar as possible, shall be consistent with
the requirements of a non-qualified stock option.

         13. Option Not to Affect Employment. The Option granted hereunder shall
not confer upon Optionee any right to continue in the employment of the Company
or any Subsidiary.


                                                     TB WOOD'S CORPORATION


                                                     By:

Dated as of January 26, 1999




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